Still liquidating
Market Morsel
Last week the most recent cattle slaughter statistics from the USA showed they were not in rebuild yet, despite some reports to the contrary. This week the ABS cattle slaughter data for the final quarter of 2024 allows us to check in on the Australian cattle cycle, and the numbers continue to point to liquidation, despite some local analysts stating otherwise.
The Q4, 2024 female slaughter ratio (FSR) came in at 51.8%, down from 52.2% in Q3. This means that the national cattle herd is still in a liquidation phase, as we are above the 47% threshold. But we have seen a slight pullback showing a weakening liquidation pattern. There is likely a bit of a two speed situation at present across the country with some northern regions favouring rebuild while southern players are still a little too wary to start increasing their herd.
The annual average FSR for 2024 came in at 51.5% and as the chart above shows it is a relatively reliable indicator of the herd rebuild or liquidation status. Although, not as strong an indicator as the US FSR is for predicting where in the cycle the US cattle herd is sitting. Meat & Livestock Australia (MLA) spend a lot of time, money and effort in surveying producers and analysing theses results. As shown in their most up-to-date cattle industry outlook from September 2024 they were forecasting a herd decline of 1.4% in 2024 and a decline of 2.0% in 2025.
An annual average FSR in the mid 51% area, as we have currently, is consistent with these types of magnitude national herd decline in percentage terms. As the scatter plot of annual herd change to annual average FSR from 2005 onwards shows below (taking the line of best fit) an FSR above 47% is usually consistent with herd decline, while an FSR below 47% is usually consistent with herd rebuild. Again, the line of best fit demonstrates that an FSR around 51.5% is consistent with the herd dropping by 2-3% as per the MLA forecast.
